OTTAWA — The United States is protesting a Canadian government move to penalize foreign owners of empty dwellings in Canada, one of the ways the federal Liberals are trying to push speculators’ money out of the housing market.

U.S. Trade Representative Katherine Tai raised the American objections with Trade Minister Mary Ng when she visited Ottawa and Toronto May 5 and 6, according to an account of the first day’s discussion that Tai’s office released. The report on the visit from Ng’s office didn’t mention the U.S. complaint.

It’s a fresh irritant in a relationship with longstanding strains over Canada’s dairy and lumber policies, and new concerns here over the Biden administration’s protectionism on everything from construction steel to electric vehicles.

The Liberal government’s Underused Housing Tax Act is part of the bill implementing last fall’s federal fiscal update, which finally passed its third reading in the House of Commons May 4 and is now in the hands of the Senate. The act would charge a one per cent federal tax on residential property owned by people who aren’t Canadian citizens or residents “that is considered to be vacant or underused.”

Renting a place out or living in it for at least six months exempts the property from the tax, and it doesn’t apply to places that can’t be inhabited year-round—so many cottages, cabins and vacation properties aren’t covered. According to the government’s projections, the tax would bring in about $200 million a year.

(This is separate from the two-year ban on buying Canadian property that the Liberals want to put on most people who are neither Canadian citizens nor residents. That’s in the bill for this spring’s budget.)

Tai’s office didn’t reply to The Logic’s inquiries about the nature of her concerns with the tax, but it included the tax in an annual report on trade barriers the U.S. believes it faces, released at the end of March.

The 517-page list of grievances notes the housing tax at the end of its chapter on Canada, after cheese compositional standards and price regulations for medications: “The tax’s differentiation between Canadian and non-Canadian-owned real estate raises questions regarding whether this tax is compliant with Canada’s international trade obligations,” it says, without indicating which obligations.

“Canada takes its commitments and obligations under international agreements seriously,” Chris Zhou, a spokesperson for Ng, wrote in an emailed response to a question about Tai’s concerns.

Rep. Brian Higgins, a Democrat who represents Buffalo, N.Y., on the border with Canada, pointedly reminded Tai of the issue in an open letter the day before she left for Ottawa.

“This tax is expected to impact many of my constituents, and Americans across the country who own property in Canada,” he wrote. “The shared community and culture between the United States and Canada is a unique, mutually beneficial economic and social bond that we must prioritize and foster for the prosperity of the two countries. A punitive tax on non-Canadians will jeopardize this relationship and harm many on both sides of the border in the process.”

As many as 15 per cent of the properties in Fort Erie, Ont., the town on the other side of the Niagara River from Higgins’s district, are owned by Americans, he wrote. Even with the exemptions for vacation properties, Fort Erie is in a census area that includes more than 400,000 people, along with the cities of Niagara Falls and St. Catharines.

The legal basis for his objection is the Canada-U.S.-Mexico trade agreement that replaced NAFTA: “Any restriction of property ownership on the basis of nationality violates the [treaty’s] bedrock non-discrimination principles,” he wrote.

He didn’t point to any specific language; the treaty doesn’t say anything about who is allowed to buy real estate in each other’s countries.

If the U.S. wants to use Canada’s housing measures as a bargaining chip in trade talks, that might not matter.